Gaming analysts left the industry’s annual conference in Las Vegas more upbeat about sports betting stocks than their recent performance would suggest.
Sports betting trends improved to start the NFL season while online casino growth remained healthy, according to reports from Citizens, Macquarie, Stifel and Truist following last week’s Global Gaming Expo. Prediction markets, however, remain a major source of uncertainty as DraftKings and FanDuel invest heavily ahead of a potential U.S. Supreme Court review.
Gaming stocks are down an average 24% this year, compared to an 11% gain for the Russell 3000, Citizens analyst Jordan Bender wrote in his analyst note. The industry has lost roughly $86 billion in market value over the past year even as underlying business trends have not materially changed, analysts argued.
NFL betting trends start strong
Citizens said operators were constructive on wagering trends coming out of the World Cup and entering football season, with sustained growth potentially driving upward revisions to handle estimates in coming quarters. Macquarie analyst Chad Beynon similarly reported better NFL engagement following a softer August.
Stifel analyst Jeffrey Stantial said FanDuel is seeing a promising return from increased promotional spending during the second half of the year, while sportsbook hold and promotional intensity have been better than feared. Truist analyst Barry Jonas pointed to World Cup customer retention, reactivation and higher parlay betting as drivers of the strong start to NFL handle.
Those trends, along with continued strength in online casino, could provide enough upside to third-quarter results to reverse some of the negative stock momentum.
DraftKings closed Friday at $18.59, down about 48% this year, while FanDuel parent Flutter finished at $74.81, down about 65%.
Sports betting stocks have upside
Citizens rates both DraftKings and FanDuel at market outperform, with a $35 target for DraftKings, down from $37, and a $145 target for Flutter, down from $159. Those targets imply roughly 88% upside for DraftKings and 94% for Flutter from Friday’s closing prices.
Truist rates both buy, with targets of $29 for DraftKings, down from $30, and $120 for Flutter, down from $130. Macquarie rates Flutter outperform with a $150 target, down from $160.
Stifel maintained buy ratings on both stocks, with a $36 target for DraftKings, down from $38, and an unchanged $133 target for Flutter.
The biggest point of agreement across the four analyst reports was what may be keeping investors on the sidelines.
Prediction markets cloud outlook
Prediction market spending and legal uncertainty dominated discussions at G2E, analysts said, even as recent court losses have increased the possibility of a U.S. Supreme Court decision in 2027.
Despite the uncertainty weighing on stocks, analysts continue to find little evidence that prediction markets are taking meaningful business from sportsbooks. Macquarie and Truist said the products appear to be expanding the overall betting market rather than cannibalizing existing sportsbook customers, while Citizens sees opportunities for operators, exchanges and suppliers to benefit.
Early results from the $200 million to $300 million DraftKings expects to invest in prediction markets this year point to lower customer acquisition costs and shorter payback periods, according to Truist. The company is already pulling additional spending forward from 2027, which Stifel said should give it more time to monetize new customers before sports contracts could potentially be restricted.
Truist said Flutter now expects to spend less than $200 million this year, down from an initial $300 million, partly because its combined FanDuel app has reduced marketing costs. Flutter continues to view prediction markets primarily as a way to acquire customers in states without legal sportsbooks, while Stifel said its near-term prediction market earnings are largely coming from making markets on third-party exchanges.
Macquarie sees an even larger long-term opportunity for Genius Sports and Sportradar to provide official data, pricing and trading services to market makers. Sportradar reiterated expectations for “tens of millions” in near-term prediction market revenue, while Stifel estimates Genius’ major exchange deals could generate $30 million to $50 million without NFL data and roughly twice that with it.
